How Is Declining Investment in China Divided Up These Days?

According to the Dow Jones press release, consumer services get the most venture capital. In 2012 there were fewer than a hundred deals representing $2 Billion in venture capital. The second largest recipient of venture capital in China is information technology which saw just over forty deals last year amounting to just over half a billion dollars. These two sectors led in the declining investment in China with roughly forty percent falls each from 2011.

Unlike the two top sectors, business and financial services investment rose by a couple of percent with around $450 million invested in twenty-seven deals.

Other sectors seeing a fall in investment are health care, utilities, and energy companies. These sectors in aggregate brought in just over $300 million in twenty deals. These sectors fell as a group by about forty percent.

Is This the End of the Ride?

Ever since President Nixon went to China and started opening the communist country up to the West, China has been on a growth spurt comparable to the economic growth of the United States after the US Civil War. The end result of the US growth spurt at the end of the 19th century was that the USA emerged as a world power. China has done the same thing. However, it is realistic to ask if perhaps the recently declining investment in China is a sign of a more generalized slowing. Certainly the balance of payments surpluses that China runs with many nations, most dramatically the USA, cannot be sustainable into the distant future. We have written about integrating China into the world economy on a more equitable footing and, from the US point of view, investing for a devalued dollar. Either declining investment in China will drive growth elsewhere, or the steady devaluation of the dollar and other currencies versus the Yuan will make manufacturing more profitable in the USA, as opposed to the Asian giant.

Declining Investment in China

No nation grows forever. As economic growth makes a nation more powerful its neighbors react. We are seeing that now with Chinese assertions of sovereignty over the South China Sea and the responses of the Philippines, Vietnam, Japan, and the rest. Who would have thought to see the US military having talks with the Vietnamese military over how to deal with China? Declining investment in China may simply be the first step in a more concerted effort to stem the advance of power and influence by mainland China.

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